The Office of General Counsel issued
the following informal opinion on March 6, 2000, representing the position of the New York
State Insurance Department.

Insurance Transactions Over The Internet.

Questions Presented:

1. What is the New York State Insurance
Department's regulatory approach towards Internet insurance activities?

2. What is within the purview of the
Department's regulation of Internet insurance activities (e.g. are insurance
intermediaries and reinsurance transactions regulated)?

3. What is the Department's policy in
addressing cross-border concerns?

4. What security measures are required of
insurers/reinsurance intermediaries that conduct insurance business over the Internet?

5. What measures have been taken for the
protection of the privacy of information about clients?

6. Have additional measures been taken to
prevent money laundering activities through Internet insurance activities?

Conclusions:

1. The Department's regulatory approach
towards the use of electronic commerce in the conduct of insurance business, which
includes business conducted on the Internet, is described in Circular Letter No. 33 (1999)
which can be found on our Web site at http:\\www.ins.state.ny.us. The Department's
regulatory approach is to encourage insurers to integrate elements of electronic commerce
into the marketing and sale of insurance, noting that the great majority of provisions of
the Insurance Law do not pose any impediment to electronic commerce. The General Counsel's
Office will respond to any questions presented to it regarding interpretation of the
Insurance Law in connection with the implementation of electronic commerce.

2. The Department's position is that
insurance business conducted on the Internet, or using any other method of electronic
commerce, is no different from other insurance transactions. Transactions conducted on the
Internet are, therefore, subject to the Department's jurisdiction to the same extent as
the same insurance business conducted using other means of communication. Therefore,
reinsurance transactions would be regulated by this Department in the same way whether
conducted on the Internet or not.

3. Geographical borders among nations do
not restrict the extent of the Department's jurisdiction over transactions conducted on
the Internet or otherwise, involving a New York insurance policy or contract.

4. The Department does not require insurers
conducting an insurance business on the Internet to implement any particular security
measures. However, in Circular Letter No. 33 (1999) the Department encourages insurers to
develop responsible strategies to address the issues inherent in the conduct of insurance
business electronically. One such issue is security in connection with such matters as
monetary transactions and the availability of personal data over the Internet. It is noted
therein that security and privacy are emerging issues, which will be clarified over time
as the result of regulations, court decisions and administrative actions.

5. As to measures for the protection of
privacy of information about insurance clients, beyond what was addressed in the response
to question 4 above, the Gramm-Leach-Bliley Act (S.900) was enacted into federal law soon
after the Circular Letter was issued. Under §§ 501(b) and 505(b)(2) of the Act, State
insurance regulators must establish appropriate standards for insurance providers subject
to their functional regulation relating to privacy of customer records and information.
Such standards are to include administrative, technical, and physical safeguards. The
privacy standards will apply to all means by which insurance business is transacted, both
non-electronic and electronic.

As a first step towards promulgating
standards in New York, the Department has issued Circular Letter No. 7 (2000), soliciting
from insurer licensees information of their existing policies or safeguards, if any, that
are currently in place as regards privacy. Responses were due by February 29, 2000.

6. No, the Department does not require that
insurers take additional measures specifically against money laundering activities through
the Internet.

For further information you may contact
Associate Attorney Barbara A. Kluger at the New York City Office.